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Friday, March 15, 2013

U.S. Probe of Gold Price Manipulation

The noose is tightening on manipulation of the price of gold and silver. According to some sources of the financial sector, U.S. regulators are investigating at the moment on possible price manipulation in the world biggest gold market.
The Commodity Futures Trading Commission (CFTC - Commission control and regulation of U.S. futures markets) examines closely the method of pricing in London. The Gold price is decided by few banks who meet twice a day to fix the 'spot' price of troy ounce of physical gold, according to some sources.
The CFTC focuses on transparency factors including pricing for both the gold market.

No official investigation was opened according to sources.
This study took place at a time when regulators are reconsidering larger scale criteria for financial references following a scandal involving the manipulation of interest rates. Three major banks have agreed to pay penalties totaling U.S. $ 2.5 billion following the alleged manipulation of the London interbank rate, or Libor practiced and where more than a dozen financial firms are still subject to investigation.
Is the price of gold the most important market in the world was controlled by five banks? The gold price is fixed daily by a group of banks and plays an important role on the price of the jewelery industry. It determines the gains that will be going to the mining companies that are selling their raw materials to the refineries.
This helps determine the value of derivatives whose prices are linked to metals. U.S. commercial banks had some $ 198 billion in contracts related to precious metals during the month of September 2012, according to sources from the Office of Currency Control (Office of the Comptroller of the Currency).
CFTC's decision is alarming. The agency headed since 2009 by Gary Gensler, a former executive at Goldman Sachs Group Inc., has played a key role in the global survey of interest rates.
Mr. Gensler has called for the analysis of the benchmarks that are subject to further reforms that would require them to be based on actual transactions rather than estimates submitted by industrial companies. Mr. Gensler is the co-chair of a working group of international regulators mechanism and in charge of examining these criteria and plans to publish a new set of guidelines in the spring.

"The thought that widespread manipulation or tampering (interest rates) can spread leads us to ask questions about the veracity of other key points," said Bart Chilton, CFTC Commissioner at a roundtable on February 26 in Washington on financial benchmarks. "What energy swaps, the fixing of the gold and silver in London and the whole litany of 'bors' referring to Libor, Euribor and many others.
In the case Libor, are traders who have provided false data to the industry organization in charge of publishing the reference rate with the aim of creating more profitability. Barclays PLC, Royal Bank of Scotland Group PLC and UBS AG have made regulations result in fines up to $ 1.2 billion, paid to the CFTC.
CFTC leaders have said that if Libor drew their attention. The agency had previously reported a series of cases between 2003 and 2005 imposing sanctions on companies and contractors for trying to manipulate the price of natural gas by providing false information to companies responsible for energy rankings.

The CFTC began investigating following complaints received from a number of investors in the summer of 2008. These worried indeed the sudden decline in the price of silver. And this could be the result from a manipulation or market malpractice.
The CFTC has never confirmed or denied the facts relating to the investigation.
A spokesman for the CFTC did not want to speak on this subject.
Controlling binding factors of the market prices of gold and silver has long been a source of debate.
According to Kurt Pfäfflin, precious metals broker at Daniels Trading in Chicago said that this has always been in the minds of those who lingered on theories conspiracy. He says he does not believe in price manipulation 'spots'.
Price-fixing, dating back to 1897 in the case of silver and 1919 in the case of gold, takes place through telephone conferences between banks.

Calls on gold held from 10.30 to 15 pm UK time. Calls related to money held at noon every day.
Fixing the price of gold in London involves five banks: Barclays, Deutsche Bank AG, HSBC Holdings PLC, Bank of Nova Scotia and Society General SA. Pricing involves money Bank of Nova Scotia, Deutsche Bank and HSBC.
Methods of price fixing are "based rather on the basis of supply and demand until a price is determined. This method is fully transparent. Nothing to do with the Libor "said a spokesman for the London Bullion Market Association (LBMA), in charge of guidelines on the quality of gold and silver traded on the London market. It does not handle the money.